The immigration challenges with labour hire companies5 Feb 2024

The news of the ELE Group receivership just before Xmas came as an untimely shock to the 1,000 or so workers employed through the various ELE companies, many of whom were migrant workers from the Philippines. ELE was a major, and well established, labour hire and recruitment firm which contracted workers to the construction, manufacturing, healthcare and other sectors.

The receivership and the subsequent plight of these migrant workers has prompted a call for a government review of the practices of labour hire companies. Such companies have grown significantly over the last few years due to the challenging and uncertain economic times faced by employers, and contracting workers on and as-required basis from a labour hire company made commercial sense. The previous Government overturning of the 90-day trial period may also have played a part in the decision to outsource some employment roles. Given that construction sector work is very much project-related, it also made sense for such employers to contract their labour requirements in line with project requirements.

The continuing economic uncertainty and cash flow difficulties impact across all businesses and this, most probably, contributed in part to the ELE collapse. The reality is that the labour hire option has made it easier for employers to have access to a pool of suitable workers and, as a consequence, it is the labour hire companies who carry all of the employee risk. This is a particularly high risk when it involves migrant workers as the conditions of their work visas require that they be employed, and paid, on an ongoing basis - whereas New Zealand workers can be employed on a casual basis. The logistical and cash flow challenges involved in managing a significant workforce across multiple worksites with dynamic and ever-changing demands is not for the faint-hearted!

The ELE migrant workers, as with other redundant migrant workers, have no choice but to quickly find replacement jobs and to change their visas in order to begin work again. It is this process which carries uncertainty, takes time, and incurs costs - and could be avoided if work visas were not issued specific to employers as some organisations are now calling for. However, we cannot see this happening. Many employers make a significant investment in their workforce and without having this employer linkage there is no ability for Immigration New Zealand to check if workers are actually working in accordance with their visa conditions. A possible short- term option may be something like a “redundancy visa” which could be a 3-month open work visa to provide time to find a new job and obtain a replacement visa.

Perhaps the best approach, and what INZ is now finally looking to do, is to ensure accredited employers are, from the outset, appropriately credentialled and capable of fulfilling their employment and accreditation obligations. The accreditation process has simply been too much of a “tick-box” exercise with very little rigour at all.

Since the middle of last year INZ has received 1800 complaints against accredited employers, and some 200 employers have had their accreditation revoked or suspended, or such action is in process. INZ is also actively undertaking audit checks of accredited employers (including all labour hire employers) with some 3,100 checks completed or underway to date. We are seeing INZ being much more active and rigorous with these checks which, while it is a hassle for employers, is to be welcomed.

Should INZ request to audit your business, Pathways® is available to provide you guidance.

Link: First Published in the Waikato Business News February 2024 Edition, Page 8